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Boart Longyear faces freefall

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American drilling contractor Boart Longyear has announced significant revenue losses in its 2013 full year financial results.

With US$1,223 million in revenue for the year 2013, Boart Longyear revealed a 39 per cent fall from US$2,012 million in 2012, due to challenging market conditions, lower rig utilisation and price reductions due to weak market demand.

The average rig count KPI showed a reduction in operations, with approximately 1,150 rigs in operation in the first quarter of 2013, down about 80 rigs to approximately 1,030 rigs by the end of December.

The gross margin figures revealed a 61 per cent drop from US$512 million in 2012, to US$202 million.

The company headcount proved to be a key factor in the year’s losses, with worldwide staff in 2012 at 9,162, cut by 38 per cent to 5,681 by the end of 2013.

Cutbacks to staff and spending resulted in the EBITDA dropping a massive 85 per cent to a mere US$16 million.

CEO Richard O’Brien commented on the 2013 results, pointing out that 2013 was a difficult year for the company and its stakeholders.

“We have taken decisive and aggressive action throughout the year to confront and manage the challenges created by our market and leverage, he said.

“We will continue to focus on our priorities of debt reduction, safety and compliance and serving our customers’ needs.

“We will also continue to pursue improvements to our capital structure as necessary to maximise value for all stakeholders.”

Despite overall declining market conditions and revenues, the Utah-based driller managed to keep debt relatively flat, posting a 3 per cent increase from US$512 million to US$526 million last year.

Product sales were also well below the previous year, impacted by low rig utilisation rates among customers, not surprising given the worldwide trend of plummeting exploration drilling budgets, which fell 30 per cent globally by November 2013.

Performance tooling sales were down 34 per cent to US$233 million and drilling equipment fell 49 per cent to US$73 million.

However, investments have continued in new product development, with six new products released in 2013 and more projected to launch in 2014, with focus on tooling and production, as well as incremental enhancements to existing products for increased safety and productivity.

Over the past year Boart Longyear has experienced enormous changes to top-tier management, with the appointment of CEO Richard O’Brien and chair of the board Barbera Jeremiah in February 2013, as well as the appointment of new CFO Jeffrey Olsen, due to start on 1 April.

Boart Longyear will not be providing a market outlook for 2014 revenue or EBITDA, citing market uncertainty, but also expects primary factors such as rig utilisation and product sales to remain stable and consistent with levels in the 2013 fourth quarter.

Boart Longyear CEO Richard O’Brien maintained a positive philosophy, despite the gloomy outlook.

“While we cannot predict when markets will recover, we have the experience of 120-plus years to know that mineral exploration spending will increase, as mining company reserves must be replenished to satisfy ongoing, worldwide commodity demand,” he said.

Image: Perthnow

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